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Australian Lenders Learn Nothing From Us Housing Bust: Mortgage House Offer 105% Mortgages, Westpack Offers 97% Mortgages

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http://globaleconomicanalysis.blogspot.com/2010/09/australian-lenders-learn-nothing-from.html

Smack in the face of a US housing bust and an enormous property bubble in Australia, Australian lenders are offering up to 105% mortgages.

It is amazing to see sheer stupidity played out on the assumption "It's Different in Australia".

Please consider Lenders back to throwing cash at buyers

Next month, non-bank lender Mortgage House will offer a home loan equivalent to 105 per cent of the property's value - the most generous deal since the global financial crisis kicked in three years ago.

The company also offers a 99 per cent loan-to-value ratio loan, which it launched last month, and says applications have been flooding in. "Demand is really strong; people are finding it difficult to save substantial deposits" Mortgage House CEO Ken Sayer said.

Last week, Westpac raised its LVR for new customers from 87 per cent to 92 per cent, reversing the cut it made back in January; while ANZ also last week raised the maximum LVRs from 95 per cent to 97 per cent for existing customers, and from 90 per cent to 92 per cent for new borrowers

Westpac denied it was fuelling house-price growth and said the falling unemployment and strong economy were behind its decision.

"This change reflects our growing confidence in the economic environment, reflected in the low level of delinquencies for this market segment," it said.

Australia Lenders Fuel the Bubble

In the US banks loosened lending standards and kept right on doing it until the whole mad scheme blew up. Australian banks are now making the same mistake.

People find it difficult to save for a down payment for the specific reason Australia is in a bubble. And just as the US bubble burst so will Australia's. It is really sad to see Australia lenders fuel the bubble this way.

One thing different in Australia regards the ability to "walk away". Clearly the lenders are playing off that, with no regards to ethical conduct. It won't matter.

Bubbles always pop no matter what the conditions or restraints are.

For example, the Bankruptcy Reform Act of 2005 was supposed to halt bankruptcies in the US. After the bill passed, lenders, especially credit card and Home Equity lenders, took advantage of the situation counting on home prices to rise and the inability of consumers to declare bankruptcy. The mess blow up in the lenders' faces anyway.

The same scenario is destined for Australia. Moreover, the bigger the bubble the bigger the bust. Australia's bust will be staggering.

Yes but it will be different this time. People have learned lessons from what went wrong, it won't happen again.

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Another case of shoot the messenger?

So - lets run a hypothesis based on a couple of assumptions. 1) that the Australian housing market is in the early-mid stages of a bubble and 2) You have a window of 4-5 years before it blows up, during which time you will have a secure job to let you service any mortgage up to and including $600000

On the basis of the above only, what would you do to maximise opportunities from the bubble as it grows?

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So - lets run a hypothesis based on a couple of assumptions. 1) that the Australian housing market is in the early-mid stages of a bubble and 2) You have a window of 4-5 years before it blows up, during which time you will have a secure job to let you service any mortgage up to and including $600000

On the basis of the above only, what would you do to maximise opportunities from the bubble as it grows?

Mate............................Thats the term they love to use............................

They are in peak bubble stage believe me, they are at " no one can afford a house stage", they are at " houses are at medium cost to medium wage" 8 times stage.

F00k me with a Koala Bear, this is the last throw of the dice to entice anyone into their pyramid ponzi scheme. Houses are falling over there, stagnant at best.

No, it will blow, why, because of the above but because they source all lending from the markets, overseas etc, the goverment guarantee on all savings is coming to an end, interest rates will rise to support the pacific peso, and Oz is Oz, it ain't the US or the UK, a one trip pony economy.

I would not want to be a expat pom over there soon, they are going to be in deep poooo...........

P.S. Africa is as rich in natural resource, they will have the mines, guess where the Chinese are looking to invest..........................

Edited by Panda

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Australia's different.

I think it's those little corks they have on their hats...

Just been idly looking at some local real estate, and decided to click on the NAB mortgage calculator.

The good news for the Australian housing market is that they would not lend me 6x my salary.

They would however lend me 5.96x my salary.

Glad to see they are keeping multiples sane.

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The retail sector is slowing down here so they need house prices to keep rising so people use their 'equity' to buy more stuff.

They will do anything to keep the bubble going.

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http://globaleconomicanalysis.blogspot.com/2010/09/australian-lenders-learn-nothing-from.html

Yes but it will be different this time. People have learned lessons from what went wrong, it won't happen again.

Anything above 20% requires compulsory mortgage insurance, no?

Mate............................Thats the term they love to use............................

They are in peak bubble stage believe me, they are at " no one can afford a house stage", they are at " houses are at medium cost to medium wage" 8 times stage.

F00k me with a Koala Bear, this is the last throw of the dice to entice anyone into their pyramid ponzi scheme. Houses are falling over there, stagnant at best.

No, it will blow, why, because of the above but because they source all lending from the markets, overseas etc, the goverment guarantee on all savings is coming to an end, interest rates will rise to support the pacific peso, and Oz is Oz, it ain't the US or the UK, a one trip pony economy.

I would not want to be a expat pom over there soon, they are going to be in deep poooo...........

P.S. Africa is as rich in natural resource, they will have the mines, guess where the Chinese are looking to invest..........................

It's just "koala", there's no "bear".

"Koala".

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Anything above 20% requires compulsory mortgage insurance, no?

It's just "koala", there's no "bear".

"Koala".

Heh heh, too true, there are no bears in Australia :-)

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the time to buy into a leverage backed asset is when the leverage is at its low...ie, prices are low.

when leverage is at max, and the lenders are going crazy "helping" people get in to profit, thats the time NOT to buy, its the time for BARDON et al to get out, for when leverage is maxed, the price is going nowhere.

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Just been idly looking at some local real estate, and decided to click on the NAB mortgage calculator.

The good news for the Australian housing market is that they would not lend me 6x my salary.

They would however lend me 5.96x my salary.

Glad to see they are keeping multiples sane.

:lol::lol:

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P.S. Africa is as rich in natural resource, they will have the mines, guess where the Chinese are looking to invest..........................

oh they are already. Look at Congo and it's mining resources

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I'm sure someone posted on here a few weeks ago, that the banks where also currently blowing up property in Brazil.

That was the socialist anarchists wasn't it? They blow property up. Banks are more like neutron bombs...they leave the properties standing but no living thing is left inside.

Edited by Tiger Woods?

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Heh heh, too true, there are no bears in Australia :-)

I dunno , theres probably a few 'bear dating' sites out there if you look hard enough :lol:

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The housing market in Oz is not of particular interest to me,but one thing I often wonders is this : how long can the mortgage lenders carry on as they are?

I mean they source what 40% or 50% or more of their funds from the overseas money markets. With the currency so strong versus others, surely this must make borrowing even more expensive? Or at least they are going to borrow proportionately more to make the same prior retail loan.

Ultimate lenders will want paid in their own or a reserve currency?

I guess the currency strength has already given the country 'Dutch disease' (see Wiki for definition).

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The housing market in Oz is not of particular interest to me,but one thing I often wonders is this : how long can the mortgage lenders carry on as they are?

I mean they source what 40% or 50% or more of their funds from the overseas money markets. With the currency so strong versus others, surely this must make borrowing even more expensive? Or at least they are going to borrow proportionately more to make the same prior retail loan.

Ultimate lenders will want paid in their own or a reserve currency?

I guess the currency strength has already given the country 'Dutch disease' (see Wiki for definition).

I think it is currently around 30% actually. And they have just passed a new law allowing pension funds to buy MBS. This move will provide a whole new bunch of locally sourced funding to keep the bubble inflated. Given that no one thinks there will be a crash over here, I would expect the pension funds to pile in.

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http://www.bloomberg.com/news/2010-12-20/pimco-seeks-profit-from-australia-mortgage-debt-as-european-investors-sell.html

Pimco Seeks Profit From Australia Mortgage Debt as Europe Sells

By Sarah McDonald - Dec 21, 2010 5:24 AM GMT

inShare.2More

Business ExchangeBuzz up!DiggPrint Email .Pacific Investment Management Co., which manages the world’s biggest bond fund, is buying Australian notes backed by home loans in the secondary market to profit from higher yields as European investors dump the bonds.

Pimco’s Australian unit, which manages about A$32 billion ($31.9 billion), bought AAA rated residential mortgage-backed securities this month yielding as much as 165 basis points more than the bank bill swap rate, Robert Mead, Sydney-based head of portfolio management, said in an interview. New bond sales pay about 110 basis points, or 1.1 percentage points, he said.

“We think the cheapest asset across Australian fixed- income is secondary market RMBS,” Mead said. “Distressed areas of Europe are now net sellers of Australian RMBS, which we are benefiting from.”

As much as a quarter of the RMBS sold annually by Australian lenders between 2002 and 2007 was denominated in euros to attract European investors, according to data from Standard & Poor’s. The region is now battling a sovereign debt crisis that’s seen Greece and Ireland accept financial bailouts and forced the European Union to create a 750 billion-euro ($988 billion) emergency fund.

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....it's not just the Bankers.... like here (but more so) the Government are setting the mood for the 'debt feast'...they give the first time buyer $7,000 even new immigrants (on par or thereabouts with USD now )...even Gordo could learn from this .. :rolleyes:

First Home Owner Grant

Anyone buying a house in Australia for the first time, including migrants who have permanent residence, is eligible for the First Home Owner Grant of $7,000. This sum is paid directly to the buyer of a house. (The grant is not payable for land purchases.)

http://australia.emigratenz.org/money-matters.html

Edited by South Lorne

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Pimco's Australian unit....bought AAA rated residential mortgage-backed securities this month...

“Distressed areas of Europe are now net sellers of Australian RMBS, which we are benefiting from.”

Don't worry they've been AAA rated specially for Australia and not the dodgily rated AAAs that helped to collapse the US and european system.

Aussie taxpayers being prepared for shearing by their banks and government.

Edited by billybong

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Don't worry they've been AAA rated specially for Australia and not the dodgily rated AAAs that helped to collapse the US and european system.

Aussie taxpayers being prepared for shearing by their banks and government.

...'toxic futures'......?..... :rolleyes:

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